RE-Source 2017: Realizing the Path Toward Corporate PPAs in Europe

On Oct. 10-11, 2017, several members of Schneider Electric’s renewables and cleantech team attended RE-Source 2017 — a corporate power purchase agreement (PPA) event that connects renewable energy buyers and sellers, co-organised by SolarPower Europe and WindEurope in collaboration with RE100. Of the 500 attendees, there were representatives from more than 70 companies buying clean energy, accompanied by a wide range of speakers including policymakers, commercial and industrial (C&I) renewable energy buyers, consultants, and renewable energy solutions providers. Across the many presentations and breakout sessions that took place during these two days, one thing is apparent: European PPA markets are gaining momentum, and demand is matched among both corporates and developers to strike a deal.

Stuart Donnelly, Director of Solutions Consulting & Cleantech at Schneider Electric, sat on a panel alongside speakers from the World Business Council for Sustainable Development (WBCSD), Norsk Hydro, Wacker Chemie AG and Oeko-Institut. The panel was focused on how corporate renewable PPAs fit into the wider electricity market.

Below is an overview of the discussion during this breakout session:

What is the role of C&I renewable PPAs in diversifying long-term PPA markets?

When considering an energy management and renewable energy strategy, companies typically start by outlining their commitments in a public way, possibly setting out a roadmap to meet said goals, then begin thinking about how to diversify this approach. European companies have become accustomed to using Guarantees of Origin (GOs), the predominant energy attribute certificate (EAC) available in the EU, to address energy goals. This very local approach to renewables works so long as goals are oriented along national lines. However, as renewable energy strategies become more encompassing and increasingly global, companies in Europe have turned some of their attention to other methods.

This strategic shift is where corporate PPAs come into play. When it comes to addressing global load and considering more progressive aspects of clean power procurement such as additionality, C&I buyers begin to look at the role of European PPAs to diversify the mix of tools that they use to meet public renewable energy commitments. There's also interest in an ‘opportunity map’ approach, as there are a lot of questions around which country to pick, pros and cons of doing deals in certain regions, and what type of PPA will best fit a company’s unique needs.

How do corporate PPAs fit in with governmental support schemes?

Europe is in a transition phase, moving away from the support schemes that have historically provided access to certain clean technologies. As subsidies reduce for new renewable energy projects, there is an emerging role for corporate PPAs to ‘pick up the slack’.

C&I PPA offtakers can provide the essential backing that make these projects viable. In the face of declining subsidy support, corporations have the opportunity to fill in where regulatory support schemes may fall short in propelling the renewable energy market forward.

Potential challenges exist around the learning curve required for corporates to begin thinking and acting as sophisticated energy buyers. Likewise, renewable energy project developers must understand that working with C&I buyers is a different ball game than working with utilities, as they are traditionally used to. This mutual understanding is crucial to ensure that projects receive the support they need to get off the ground, and corporates receive the right deals that help to meet their energy ambitions.

How does the lack of an integrated EU energy market affect the potential for C&I PPAs in Europe?

The lack of an integrated energy market is not unlike the challenges that were faced by organizations that pioneered the C&I PPA movement in the U.S. The States overcame this lack of electrical grid connection by exploring alternate PPA structures such as the ‘virtual’ or ‘synthetic’ PPA. Virtual PPA deals allow companies to cover a large amount of load using one agreement, across multiple states. ‘Direct’ or ‘utility-sleeved’ PPAs have been more common in Europe to this point, but in order to address a large-scale global energy strategy, C&I buyers will need to explore the potential to emulate this type of deal structure.

Though this PPA framework may be more nuanced in European markets due to differing regulatory ecosystems from country to country, there is a view that it is possible to do a virtual deal that cuts across European load. Distinct from the restrictions on choice created by regulated markets in the U.S., European electricity markets already have a high level of liberalization. Consumers are used to having more control over where are how they deploy their energy spend.

“Where there is connectivity, and where there is correlation in wholesale prices, we can structure virtual PPAs to address the aggregated consumption of pan-European companies.”

The best path toward realizing this possibility is to activate discussion — initiating open lines of communication between peers in the marketplace about how a virtual PPA might be done in Europe. It involves taking best practices learned in the U.S., and building upon them to fit the needs of both companies and developers in Europe.

What is the best approach for European C&I companies with renewable energy goals?

Local approaches to renewable energy procurement can only take a company so far. If Europe’s C&Is want to take energy commitments to the next level, it is time to explore more innovative, distributed solutions such as the virtual PPA. The buzz in the air at RE-Source 2017 rings in the same tone as the buzz witnessed just three years ago in the U.S. — where soon after there was an explosion of corporate virtual PPA deals.

New PPA structures are emerging in Europe. C&I demand is apparent and developers are eager to find corporate offtakers as the regulatory ecosystem shifts away from government support for clean energy projects. Interested C&Is are encouraged to open the conversation, start exploring what is on the horizon of possibility and collaborate on ways to diversify the tools used to meet public commitments to renewable energy.